The political deadlock continues to shadow over the Lebanese situation. In detail, this week witnessed a massive decrease in the Lebanese pound against the US dollars and reached approximately LBP9700/$. Moreover, the depreciation of the national currency will have a big impact on the prices of goods and the inflation rate in the upcoming days. It also reflects the big uncertainty of the Lebanese political situation, as the conflict between P.M. Saad el Hariri and President Michel Aoun continues, regarding the formation of the new government.
Furthermore, Lebanon has been under lockdown due to the high number of coronavirus infections, which is considered among the strictest lockdowns in the world.
As a result, the BLOM Bond Index (BBI) which is BLOMInvest Bank’s market value-weighted index tracking the performance of the Lebanese government Eurobonds’ market (excluding coupon payments) slumped this week by 1.87% to stand at 13.70 points by the week ending 25 February 2021. Meanwhile, the JP Morgan EMBI fell from last week’s 917.70 points to 898.70 points this week.
As such, the yield of the 5 year (5Y) and the 10 year (10Y) Lebanese Eurobonds increased during this period from 71.60% and 54.20% to 71.70% and 54.70%, respectively.
In the US, the economy continues to recover from corona virus pandemic with the aid of fiscal and monetary stimulus.In details, the long-term US government bonds yileds has increased this week amid inflations fears due to the US stimulus plans that may be signed before March 14. In addition, Investors should be aware of the asset price bubbles in stock market, as the huge increase in shares prices may be too good to be true. It’s worth mentioning that US composite purchasing managers index rose to six-year high of 58.8 in February from 58.7 in the previous month (any reading over 50 indicates improving economic activity). Hence, the US 5Y and 10Y increased during this week from 0.56% and 1.29% to 0.81% and 1.54%, respectively.
As such, the 5Y and 10Y spread between the yield on Lebanese Eurobonds and their US comparable narrowed from 7,104 bps and 5,291 bps to 7,089 bps and 5,316 respectively.
5 Year Credit Default Swaps, Mid-Prices (in basis points)
| 2/25/2021 | 2/18/2021 | |
| Lebanon | . | . |
| KSA | 62 | 62 |
| Dubai | 105 | 104 |
| Brazil | 185 | 160 |
| Turkey | 309 | 285 |
Weekly Change of Lebanese Eurobonds Prices
| Prices | Weekly | Yields | Weekly | ||||
| Maturity | Coupon in % | 25/02/2021 | 18/02/2021 | Change | 25/02/2021 | 18/02/2021 | Change bps |
| 1/27/2023 | 6.00 | 12.94 | 13.50 | -4.12% | 166.25% | 159.89% | 636 |
| 4/22/2024 | 6.65 | 13.35 | 13.52 | -1.21% | 101.77% | 100.33% | 143 |
| 11/4/2024 | 6.25 | 13.25 | 13.41 | -1.20% | 88.08% | 86.97% | 111 |
| 12/3/2024 | 7.00 | 12.85 | 13.38 | -3.98% | 91.67% | 88.93% | 274 |
| 2/26/2025 | 6.20 | 13.37 | 13.53 | -1.15% | 82.42% | 81.36% | 106 |
| 6/12/2025 | 6.25 | 13.52 | 13.68 | -1.10% | 77.27% | 76.44% | 82 |
| 11/28/2026 | 6.60 | 13.37 | 13.42 | -0.37% | 65.62% | 65.32% | 30 |
| 3/23/2027 | 6.85 | 13.23 | 13.42 | -1.42% | 65.60% | 64.77% | 83 |
| 11/29/2027 | 6.75 | 13.30 | 13.41 | -0.81% | 61.29% | 60.85% | 45 |
| 11/3/2028 | 6.65 | 13.06 | 13.42 | -2.69% | 58.26% | 57.00% | 126 |
| 2/26/2030 | 6.65 | 12.94 | 13.54 | -4.49% | 55.91% | 53.77% | 214 |
| 4/22/2031 | 7.00 | 12.78 | 13.45 | -5.00% | 56.80% | 54.30% | 250 |
| 3/23/2032 | 7.00 | 13.24 | 13.44 | -1.44% | 54.37% | 53.61% | 76 |
| 11/2/2035 | 7.05 | 13.45 | 13.54 | -0.67% | 52.39% | 52.04% | 35 |
| 3/23/2037 | 7.25 | 13.53 | 13.66 | -0.97% | 53.55% | 52.99% | 56 |
Source: BLOMInvest Bank